Buying Property in Tenerife – Why use a Solicitor / Lawyer

All scenarios are printed with the consent of each client and details have been changed to protect anonymity.

The estate agent is insisting I don’t need to use a Solicitor

Whilst most reputable estate agents insist that clients instruct an independent solicitor, there sadly remains a minority who actively discourage buyers from using one. Whilst we could debate the reasons for this at length, it is perhaps more constructive to focus on the implications for the buyer. We shall now look at two different scenarios:

In many cases, the agent will draft the purchase contract. In most recent examples that we have seen, the Plus Valia (a tax imposed by the town hall) is stated to be payable by the buyer. However, this tax is calculated on Town Hall tables reflecting the perceived increase in the value of the land during the period of the seller’s ownership. Hence, it is a tax both morally and legally attributable to the seller. The reality however is that the taxman will seek to enforce payment of this tax against the buyer and the property, rather than try to track down and chase the seller, who may well have gone abroad.

Historically in Tenerife, market forces and local custom and practice meant that the buyer reluctantly accepted liability for this tax. However, the situation has changed and it is now common practice for the seller to pay this tax. The situation is always open to negotiation, but it is important that buyers understand the nature of the tax and properly consider whether or not they should be paying it. In one recent case, we saved a client over 3,000 euros by amending the contract before it was signed.

We recently encountered another interesting scenario. A client instructed us on the proposed purchase of a property comprising of a residential building situated on rustic land. After obtaining a copy of the Escritura (Title Deeds), we discovered that the actual build dimensions of the property did not match those on the title deeds. After further enquiries, it transpired that the building had been substantially refurbished and extended subsequent to the original registration.

We therefore asked the seller for a certificate confirming that all applicable regulations had been complied with when the property was extended. However, no such certificate was ever obtained by the builder. Our client therefore had no assurance that the building was compliant with the relevant building, electrical and plumbing regulations.

We then reviewed copies of the contracts for the water and electric supplies. Both described the property as an ‘Almacen’ (Warehouse) rather than the usual ‘Residencial’. This is a common scenario with older, rustic Canarian properties, where locals would often designate the building as an ‘Almacen’ in order to avoid the more stringent regulations applicable to a residential property. The price per unit for the supply of water and electricity to an Almacen is also lower than to a residential property.

Regardless of how the previous owner managed to obtain the false registration, the problem for our client was that when he went to transfer those utility contracts into his own name, it was likely that each company would send an official to inspect the property and discover the error. They would then invariably require our client to produce a full ‘proyecto’ (documents demonstrating that all residential building, electrical, plumbing etc regulations had been complied with) in support of his application for new ‘residential’ utilities contracts.

Not only would this incur substantial costs, but there was a real risk that a property that had been extended without proper planning permission, documentation or correct utilities registrations might also fall foul of the building, plumbing and electrical regulations. To put such installations right to the extent that a Proyecto could be issued, could run into many thousands of euros. In the meantime, there was a real danger that the utilities might be disconnected, leaving our client living in the dark ages.

Of even greater concern was that the seller’s agent insisted to our client that this was a perfectly common and normal situation and that ‘everything would come out in the wash’. Interestingly however, they were unwilling to put this in writing or to offer to indemnify our client if indeed any such problem did arise.

Had our client followed this particular agent’s advice and not instructed us as his independent solicitors, he would almost certainly have been railroaded into buying the property whilst ignorant of the risks and implications. Fortunately for our client, we continued to negotiate with the seller’s agent until we achieved an outcome satisfactory to our client.